In the Matter of the Complaint

Against RICHARD W. VERRET,
2480 Overbrook Street
Beaumont, TX 77703-2828

MILTON VERRET,
925 Shakespeare Street
Beaumont, TX 77706-5340

VERRET ENTERPRISES, INC.,
450 Bowie Street
Beaumont, TX 77701-3004

U. S. COIN RESERVE,
Post Office Box 148
Houston, TX 77001-0148

U. S. COIN RESERVE,
Post Office Box 13587
Denver, CO 80201-3587

U. S. COIN RESERVE,
Post Office Box 7736
Beaumont, TX 77706-7736

U. S. COIN RESERVE,
Post Office Box 2832
Beaumont, TX 77704-2832

P.S. Docket No. 20/30

Finn, James D. Jr. Acting Judicial Officer

APPEARANCES FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.
Timothy J. Mahoney, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1122

APPEARANCES FOR RESPONDENTS:
Theo W. Pinson, III, Esq.
Diana Resnick, Esq.
Greenwood, Koby, Old, Pinson & Bussey
1900 American General Tower
2727 Allen Parkway
Houston, TX 77019-2115

POSTAL SERVICE DECISION

Respondents have appealed from an Initial Decision of an Administrative Law Judge which holds that Respondents are engaged in conducting a scheme for obtaining money or property through the mail by means of materially false representations in violation of 39 U.S.C. 3005.

Background

The Consumer Protection Division, Law Department, United States Postal Service (Complainant), initiated this proceeding by filing a Complaint which, as amended, alleged that Respondents make the following materially false representations relating to their sale of coins:

(a) U. S. Coin Reserve distributes currency on behalf of the United States Government;

(b) The offer for sale of Kennedy Half Dollars by U. S. Coin Reserve has been directed or authorized by officials of the United States Government;

(c) The sale of Kennedy Half Dollars by U. S. Coin Reserve is a release of silver by or on behalf of the United States Government;

(d) All the Kennedy Half Dollars offered for sale by U. S. Coin Reserve are guaranteed by the United States Government to be in the condition claimed in the advertisement;

(e) The Kennedy Half Dollars offered for sale by U. S. Coin Reserve are all in MS-70 condition;

(f) The price at which U. S. Coin Reserve is selling Kennedy Half Dollars is unusually low for the particular coins sold in their actual condition;

(g) Any of the Kennedy Half Dollars offered for sale by U. S. Coin Reserve is likely to be worth $380 in five years;

(h) U. S. Coin Reserve is a depository for federal government-owned coins;

(i) The Kennedy Half Dollar is the only United States coin to have two famous designers and their respective monograms stamped on either side; and

(j) The Kennedy Half Dollars offered for sale by U. S. Coin Reserve are rare coins because of the feature represented as alleged in subparagraph (i) and because of other unique qualities.

Paragraph 5 of the Complaint alleges that these representations are materially false.

In its Answer, Respondents admitted making the representation of paragraph 4(e) of the Complaint and the representation of paragraph 4(i), insofar as such latter representation is based on opinion and belief. Respondents denied making all the other alleged representations of paragraph 4 and denied the allegation of paragraph 5. At a hearing before an Administrative Law Judge, both parties presented evidence in support of their respective positions. Following the filing of Proposed Findings of Fact and Conclusions of Law, the Administrative Law Judge issued an Initial Decision in which he found that Respondents make the representations alleged in the Complaint and that those representations are materially false in violation of 39 U.S.C. 3005.

Respondents' Exceptions

Respondents have filed three exceptions to the Initial Decision. Two of the exceptions pertain to findings of fact made by the Administrative Law Judge. The other exception pertains to certain conclusions of law.

Exception One

"The Administrative Law Judge erred in finding that the representations set forth in paragraph sic 4(a), (b),

(c) and (h) of the Complaint were made."

Paragraphs 4(a), (b) and (c) of the Complaint, supra, allege that Respondents represented themselves as a distributor of currency on behalf of the United States Government, that their Kennedy Half Dollars had been authorized or directed for sale to the public by Government officials, and that the sale of the Kennedy Half Dollars was a release of silver by or on behalf of the United States Government. Paragraph 4(h) alleges that Respondent, U. S. Coin Reserve, represented itself to be a depository of government-owned coins.

It is established that Respondents' advertisement must be considered as a whole and its meaning determined in view of its impact on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178 (1948); Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387 (5th Cir. 1977). It is the net impression the advertising makes which is important, and even if an advertisement is so worded as not to make an express representation, if it is designed to mislead the reader, the false representation statute is applicable. Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976); G. J. Howard Co. v. Cassidy, 162 F. Supp. 568 (E.D. N.Y. 1958). Additionally, the impression of advertising on the ordinary mind may be determined solely on the basis of the advertising itself without the assistance of lay or expert testimony. Vibra-Brush Corp. v. Schaffer, 152 F. Supp. 46l, 468, rev'd on other grounds, 256 F.2d 68l (2d Cir. 1958); Standard Research Labs, P.S. Docket No. 7/78 (P.S.D. Oct. 27, 1980).

In this instance the language of the advertising itself clearly shows that the representations alleged in paragraphs 4(a), (b), (c) and (h) of the Complaint were made. The heading of the advertisement states in large (l/2 inch high), dark, bold print "President John F. Kennedy Government Silver" followed by the statement in l/4 inch high dark print "U. S. Mint State, 900 Fine Pure Silver." Paragraph headlines throughout the advertisement state "U. S. Coin Reserve," "Unique Rarity," "Government Silver Released," "Strict Limit," "American Hero." The left hand column of the advertisement contains the following sales language in smaller print:

United States Coin Reserve, a distributor of Government Currency is now releasing its last reserve of only 30,000 half dollars of the famous John F. Kennedy Government Silver. Chief Executive Officers have ordered the United States Coin Reserve to sell the only remaining stockpiles....

At the bottom of the advertisement the words "U. S. Coin Reserve" appear in large l/4 inch dark print, along with two addresses, a Houston, Texas, Post Office Box, and a Denver, Colorado, Post Office Box. To the left of the addresses is the statement "All coins held in the UNITED STATES COIN RESERVE BUILDING."

The advertisement, taken as a whole, clearly conveys the representations alleged. The banner headline "Government Silver," the paragraph heading "Government Silver Released," the sales language "United States Coin Reserve" (as compared with Respondents' usual name "U. S. Coin Reserve"), "distributor of Government currency," "Chief Executive Officers have ordered...," collectively create an impression that U. S. Coin Reserve is a distributor of currency on behalf of the Government; that the sale of the half dollars by U. S. Coin Reserve has been authorized by the Government; and that the release of silver is a Governmental release. Additionally, the language at the advertisement's end that all coins are held at the United States Coin Reserve Building would lead the ordinary reader to believe that U. S. Coin Reserve is a depository for Government coins. The Administrative Law Judge correctly found the representations alleged by the Complaint were made.

Exception Two

"The representations in paragraphs 4(d), (e), (f), (g), (i) and (j) are true and the Administrative Law Judge erred in not so finding."

Paragraph 4(d) of the Complaint alleged that Respondents repre- sented that its Kennedy Half Dollars were guaranteed by the U. S. Government to be in the condition claimed by the advertisement ("Flawless MS-70 Uncirculated," i.e., mint state perfect coins). The Administrative Law Judge, relying on the testimony of Complainant's witness, Francis Frere, Assistant Director for Marketing, United States Mint, found that the representation made was false. Mr. Frere unqualifiedly testified that the United States Mint does not guarantee the condition of its coins "by MS standards." (Tr. I, 173). Respondents contend the Administrative Law Judge incorrectly construed the language of the advertisement. According to Respondents the reference in the advertisement to a guarantee by the United States pertained to the silver content of the coin, not to its mint state. The contention is rejected. The sentence of the advertisement " a lso all Government Silver is fully guaranteed by the United States..." immediately followed the sentence which represented the coins to be "Flawless MS-70 Uncirculated Gems." The reasonable interpretation of the two sentences, when read together by a person of ordinary mind, would most probably be that the United States Government guarantees the MS-70 condition of the coins.

Paragraph 4(e) of the Complaint alleged that Respondents represented its half dollars to be in MS-70 condition. Respondents admit making the representation and the Administrative Law Judge found it to be false. In so finding the Administrative Law Judge relied on the testimony of Complainant's two expert witnesses, both of whom had examined nine of the coins offered for sale by Respondents. Both testified the coins were of a grade less than MS-70. The Administrative Law Judge gave little weight to the contents of an affidavit by Respondents' coin supplier which stated in part that many of the coins supplied would be in perfect condition, and which expressed his opinion that some experts could grade many of the coins as MS-70. Both of Complainant's witnesses had impressive credentials and possessed high degrees of expertise. The contents of the affidavit from Respondents' coin dealer showed him to be experienced in the coin business but did not elevate him to the status of an expert. Additionally, as pointed out by the Administrative Law Judge in the Initial Decision, the witness's opinions were quite qualified. The preponderance of the evidence establishes the falsity of this representation. The finding of falsity is affirmed.

Paragraph 4(f) of the Complaint alleged that Respondents represented that the price at which U. S. Coin Reserve is selling the half dollars is unusually low. Respondents contend the Administrative Law Judge erred in relying on the testimony of one of Complainant's expert witnesses as the basis for his finding that the representation was false. In fact the Administrative Law Judge did rely on such testimony to the effect that the market value of the coins, which Respondents were selling for $12.90 or $18.90 each, was only approximately $5 to $8 each (Tr. I, 112-14). Respondents presented no credible contrary testimony on this issue. The preponderance of the evidence on this issue establishes the falsity of the representation. The Administrative Law Judge's finding is affirmed.

Paragraph 4(g) of the Complaint alleged that Respondents represented its half dollars would be worth $380 in five years. The Administrative Law Judge correctly found the representation to be false. Considering the fact that Respondents purchased the coins from their supplier for $3.875 each, they would have to appreciate by approximately 9806% in five years to reach the anticipated appreciation level contained in the advertisement. Utilizing the $12.90 retail price at which Respondents sold the coins, the appreciation percentage would still be an astronomical 2945%, or by using the other advertised price of 8.90, 20l0%. The record shows that Respondents arrived at the $380 figure based on a stock research letter which showed that in the last ten years investments in coins had increased by 21.4% per year (RX-10). The Administrative Law Judge correctly held " t his representation by Respondents is so highly speculative and so lacking in credible support that it is found to be false." (Initial Decision, p. 19)

Paragraph 4(i) of the Complaint alleged that Respondents represented "The Kennedy Half Dollar is the only United States coin to have two famous designers and their respective monograms stamped on either side." The Administrative Law Judge found the representation was falsely made.

The advertisement stated "... this is the only issue of U. S. coinage to have two famous designers and their respective monograms stamped on either side." Thus, the representation was made.

Complainant's witness, Mr. Frere, testified as follows on this issue.

Q. By Complainant's counsel . How many coins that you know of have been made by two different designers with their own individual monograms on either side?

A. In recent years you had the one cent -- since 1959, the one cent coin. You had two different engravers; one on obverse and one on reverse. And the

Bicentennial, you had the quarter, the half-dollar and dollar, each with a different engraver on the obverse and the reverse.

(Tr. I, 174-75)

The representation thus was falsely made notwithstanding Respondents' contention that the witness lacked credibility since he was unable to name the other famous designers.^1/

Finally by the exception to the finding pertaining to paragraph 4(j) of the Complaint, Respondents allege the Administrative Law Judge erred in holding the advertisement falsely represented its coins to be rare, arguing mainly that "rare" is a comparative word. The Random House College Dictionary defines "rare" as "occurring infrequently; unusual; uncommon." The words "exceptional, extraordinary, singular" are given as synonyms. The Administrative Law Judge correctly determined the representation to be false in the following discussion:

Complainant's expert said at one point when he was commenting on the value of the coins -

"***The coins are not a scarce coin; they are fairly common." (Tr. I, 114)

When asked whether he considered the coins he had examined to be rare coins because of any feature inherent in their design or signatures, he replied -

"Nothing like that at all. The coin is not a rare coin." (Tr. I, 115)

In his deposition which was received in evidence, the other expert said that Kennedy half dollars "are commonly available" and that they are "available in huge quantities." (CX-32, pp. 43, 46)

(Initial Decision, p. 21)

The cited transcript and exhibit references are accurate. They clearly establish the coins in issue are not "rare." The Administrative Law Judge's finding is affirmed.

Exception Three

"The Administrative Law Judge erred in his Finding of Conclusions of Law numbers 3, 4, 6 and 9."

Conclusion number 3 found that Respondents made the allegations alleged in paragraph 4 of the Complaint. Conclusion 4 found that a person of ordinary mind would interpret Respondents' advertisements as expressed in paragraph 4 of the Complaint. Conclusion number 6 found the representations to be false. Conclusion 9 found Respondents engaged in a scheme for obtaining money through the mail by means of materially false representations within the meaning of 39 U.S.C. 3005. Respondents set forth no separate bases for the exception, arguing merely that the underlying findings of fact are erroneous. However, since these Conclusions of Law are based on findings which are supported by a preponderance of the evidence of record they are affirmed.

Conclusion

After consideration of the entire record it is concluded that Respondents are engaged in a scheme to obtain money through the mail by means of materially false representations. Accordingly, Respondents' appeal is denied. The orders authorized by 39 U.S.C. 3005 which were sought in the Complaint are issued with this decision.

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1/ The witness in fact did name the designers for the one cent coin. The designer of the reverse of the coin was the same individual who designed the reverse of the Kennedy half dollar.